Startup Expenses You Should Avoid

Startup

Article

04/05/2016

There's one rule of thumb most veteran entrepreneurs can agree on — startup expenses are almost always more than initially projected. By nature, entrepreneurs are confident that once they get the company up and running, sales will pour in and the business will grow of its own accord. In reality, things don't often go as planned.

The key to avoiding the pitfalls of running out of cash is to scrupulously pinpoint expenses you can avoid or at least put off for six months or a year. Here are several critical areas to watch for:

Hiring

New business owners often focus on creating a small workforce of talented, high-priced individuals, in the hopes this will kick-start the venture. They learn that personnel costs (sourcing, recruiting, salaries, benefits, etc.) can quickly consume their operating capital and stall the momentum they're looking for.

A more sensible approach involves an objective appraisal of what the startup needs right now in terms of human resources. Is it possible to draw upon the resources of contractors or an outsourced personnel agency to handle your immediate needs? This way, you're paying strictly for the services you need when you need them.

Another option: Recruit individuals who demonstrate a powerful belief in your new product or service, and who are open to proving their worth on a commission-basis. These salespeople are likely better at generating business in the early stages than a "run-of-the-mill" employee.

Software

There's plenty of office-related software you can download for little or no expense. This includes video conferencing services (offered by Skype, Google, and others), available for free or at minimal cost. The same idea applies to other business functions, such as planning a budget, making a presentation for potential investors and preparing a business plan or other venture-related documents. Seek out free templates for these functions online.

Networking

Travel and networking are other areas where startup expenses can be minimized. Networking at every industry event taking place around the country sounds like a good idea, but it's not necessarily helpful for your business (and will cost a lot of money).

At the outset, look for conferences, trade shows, and other events taking place closer to home — particularly those with a decent potential for revenue. This approach requires less time and money, allowing you to focus your energies elsewhere. Industry-specific webinars offer another free or low-cost alternative to business travel.

Office space

A fancy corner office in a high-end industrial park sounds like something befitting your new venture, but it's a major cost item to avoid early on or put off entirely. Is your business primarily an online venture? If so, you can work from home or your local Wi-Fi-enabled cafe.

What about your employees? Instead of housing them in costly commercial property, consider a virtual office with easy, reliable, online communication at any time of the day or night.

Marketing

Again, a new business owner's first impulse is to throw money at big, splashy marketing campaigns. But there's no guarantee this kind of expensive effort will generate the number of customers you need to grow.

An appealing, user-friendly and well-structured website is a necessity (no point in cutting corners there). But this is also the starting point for a modest and focused social media marketing effort.

Do some research. Find out where your prospective target audience "lives" on social media. Create content of value to prospects (or offer links to existing content) and begin a dialogue with people who show an interest in your fledgling business. As fans and followers accumulate, you can crank up your marketing campaign, while also monitoring the costs involved.

Finally, keep an eye out for bargains to help build your business. Almost anything your startup requires can be found at a lower price or through frequent buyer discounts, from refurbished electronics to office equipment purchased at a warehouse store.

The important thing is to stay focused on avoiding unnecessary expenses wherever possible, so you have the capital you need for your long-term objectives.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.

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